Never send letters without speaking to a competent patent litigator. Patent enforcement is not a DIY business.
Jeff: That hardly seems fair. I developed the idea, I got a patent, I did everything right--but if you're a big company with plenty of resources you can still hammer me.
Alexander: The world of intellectual property is asymmetrical in a number of ways. Individuals and small companies hold 60% of all patents. Large corporations only hold 40%. Yet when it comes to monetizing those patents, large corporations generate 99% of all revenue from patents.
Another way IP is asymmetrical is that patent litigation is the single most expensive form of litigation: The median cost of a patent litigation is about $5.5 million dollars.
If you're a garage inventor you cannot afford patent litigation unless the car in your garage is a Rolls.
Jeff: Then if my rights have been infringed upon by a major corporation... I'm screwed.
Alexander: The crux of the patent system is a bargain between the government and the inventor: The inventor discloses the invention in return for protection.
Unfortunately most of the time you can't afford to enforce that protection. Besides the staggering money involved, you may become a target of a counter-suit; if you file a lawsuit against a big company you can bet they will counter-sue to force you into submission.
The patent system was designed to protect the little guy, but in reality patent litigation is the sport of kings. If Microsoft sues Motorola they are on a level playing field. When a small businessman tries to sue a major corporation, the field is far from level; they will engage in scorched earth litigation to spend you to the ground and make you go away.
Other Strategies
Jeff: No matter how well funded, almost no small businesses have the resources to take on a major corporation. (Maybe the big boys know that?) I know entrepreneurs that have said, "Look, I know it's not right... but I just can't afford a fight. I'm better off developing something else and trying to hang on to that as long as I can... and then doing it again."
They see constant invention as a necessity since they can't afford to hang on to their IP rights for very long.
Alexander: It's a tough game but there are solutions. One, for example, is to engage a law firm on a contingency basis. Typically the contingency is one-third of the damages recovered. That approach creates a number of problems, though, one of which is still money: You will still be responsible for out-of-pocket expenses, which in patent litigation typically means $1 to $2 million.
Secondly, if you don't have any experience managing patent litigation or don't have full-time general counsel on staff that can manage the outside law firm, it's not going to end well for you. Law firms work best when closely managed by inside counsel that keep them on a short leash.
Jeff: Very, very few small businesses have inside counsel. I don't know any that do. And I'm not a huge fan of the contingency thing, if only because I associate "contingency" with late night "Call now if you or someone you know been injured in an accident" commercials.
Alexander: The best step is to engage a firm that partners with small businesses to help them enforce patents. For example, our firm funds and manages the entire process. It's all on our dime: We manage the process, hire the law firm, engage in licensing activities... we do 100% of the work and take on 100% of the financial risk... and of course we share in the rewards.
I founded a company called Rapitech Systems and took it public in 1986. Our technology was stolen and I couldn't convince our board to engage in litigation, so I stepped down and spent years enforcing and licensing those patents. That experience formed the basis of our business model.
While patent litigation is the sport of kings, we think defending the weak is the noblest of sports.
How It's Done
Jeff: Give me an example of successful patent litigation.
Alexander: Two brilliant people, Tony Agnello and John Paul, patented technology for wireless microphones. When their company went out of business they engaged in licensing discussions with other companies that built high-quality microphones.
Of course no one paid attention. A patent is just a license to sue, and a non-exclusive license is just a covenant not to sue. When a company sees someone who wants to license an invention and knows the person doesn't have the resources to sue... they typically don't take out a license.
So the inventors came to us for help. We looked at their patent and realized that an entirely different industry was also infringing on their patent: cellular communications. Cell phones are wireless devices... but the inventors had never thought about the fact the technology in use was the same.
So we sued the entire wireless industry in the U.S. We sued national carriers, regional carriers... we went after them all. After eight years of litigation we collected $60 million in damages and we licensed the entire U.S. wireless industry as well as the major cell phone manufacturers.
That's one example of how inventors can really strike gold when they develop something... and work with a firm that is able to see broader possibilities for what they develop.
Jeff: I tend to think of copyrights, trademarks, and patents as a way to play defense... but that's only one aspect.
Alexander: Most people think they need a patent to be able to practice their own inventions. A patent has nothing to do with what you do; a patent gives you the right to exclude others from making, using, selling, or offering to sell your invention.
Don't think you need to get a patent to do your thing.
Plus many entrepreneurs see patents as a tool, and something of an after-thought: A way to enhance their image or boost their credibility, or as an element that will help convince venture capitalists to fund their company.
A patent could be the single most valuable thing you own. Don't see patents as after-thoughts.
See patents as a source of revenue--because often they are.
Check out other articles in this series:
